EU threat to euro stitch-up

26th November 2003, 0 comments

BRUSSELS, Nov 26 (AFP) - The European Commission reiterated Wednesday that it could take EU governments to court after finance ministers let France and Germany off the hook despite their flouting of strict public deficit rules.

BRUSSELS, Nov 26 (AFP) - The European Commission reiterated Wednesday that it could take EU governments to court after finance ministers let France and Germany off the hook despite their flouting of strict public deficit rules.

Members of the EU executive arm called a special meeting after the decision Tuesday, which sparked a warning from the European Central Bank that the deal carried "serious risks".

But he said: "This is a possibility," adding: "This is not the only thing that will be discussed."

The 20-member EU executive, which holds its weekly meetings Wednesday morning, called a special session for Wednesday afternoon, after which its position was likely to be further clarified.

The EU ministerial accord suspended "for the time being" disciplinary measures against Paris and Berlin for failing to get their public deficits under 3.0 percent of gross domestic product (GDP), as required by the Stability and Growth Pact which underpins Europe's single currency.

The accord was issued in the form of "Council conclusions", side-stepping the legal requirement laid down in the EU's 1997 Amsterdam Treaty for countries to vote on deficit-busting recommendations issued by the Commission.

If the recommendations had been followed, France and Germany would now be effectively under the economic tutelage of Brussels until they got their deficits down, on pain of multi-billion-euro fines.

Instead, the finance ministers staged the artful dodge of putting an "excessive deficit procedure" launched by Solbes against the heavyweight pair "in abeyance", effectively shutting down the prospect of fines.

In fact their conclusions repeated many of the recommendations that the commission had proposed, notably to bring their deficits to below three percent of GDP next year.

But the commission said Wednesday that it was not primarily contesting the content of the ministers' accord but the way in which it was agreed.

"What the commission contested ... was the council's (of ministers) conclusions ... in which, outside the normal procedures, the council tried ... to include most of the commission's recommendations in a text which has in our view not the proper legal basis," said Thomas.

"That is what we are contesting, not the result but the way it was done," he added.

Italian Finance Minister Giulio Tremonti, whose country currently holds the EU presidency, argued Tuesday that the ministers had done nothing illegal in suspending disciplinary procedures against France and Germany.

He made the comments after Solbes, in a testy joint press conference, said that the decision marked a "serious change" in EU procedure, from a "rules-based arrangement to a politically-based decision system."

"We don't see anything wrong with defining this is as a political agreement. At the end of the day, this was the only solution possible and therefore it is the best solution," Tremoni said.

"Even political decisions are legal," he added, causing the Spanish commissioner to flinch in protest.